Xerox has agreed to pay $1.5 billion in cash to acquire Lexington, Kentucky-based printer manufacturer Lexmark International Inc.
The deal, which Xerox stated is anticipated to close in the second half of 2025 following approval by Chinese and U.S. regulators, includes debt and liabilities. Xerox is a group of Asian investors, including Ninestar Corp., PAG Asia Capital, and Shanghai Shouda Investment Centre.
A strategic move?
Xerox made a calculated strategic move with the acquisition to improve its standing in the global printing market, particularly in Asia and Latin America. According to Xerox CEO Steven Bandrowczak, the agreement will increase market visibility, bring manufacturing in-house, and result in over $200 million in cost savings annually through improved sales, marketing, and procurement initiatives.
Xerox to acquire Lexmark. Learn how this acquisition will continue our Reinvention and sharpen our focus on our core print business: https://t.co/DwANHtRU59 pic.twitter.com/jv1q3h9EYq
— Xerox (@Xerox) December 23, 2024
The Lexington, Kentucky-based company Lexmark was spun off from IBM in 1991 and sold to Chinese investors for $3.6 billion in 2016. Through the acquisition, Lexmark will once again be owned by the United States. One of the few printing industry segments that is expanding is color printing for standard documents, which is the company’s specialty.
A combination of debt and cash will be used to finance the transaction. Xerox has agreed to lower its yearly dividend from $1 to $0.50 per share in order to finance the acquisition. Given the challenges the printing industry faces as a result of the shift to digital documents, the deal is anticipated to improve profitability and cash flow right away.
This acquisition positions Xerox for long-term growth and profitability, Zeus Kerravala, a principal analyst at ZK Research, said.
Xerox’s shares jumped 8.7% after the announcement but are still down considerably over the last five years. The company, which has seen its revenue decline and faced stiff competition from HP and Canon, aims to position itself as one of the top global players in the printing market by serving more than 200,000 clients across 170 countries.
Lexmark’s current CEO, Allen Waugerman, will continue to lead the company. Regulatory approvals across jurisdictions, including China, are not expected to pose significant challenges, according to Bandrowczak.
Jefferies LLC and Citigroup Inc. are advising Xerox on the deal, which received legal counsel from Ropes & Gray LLP and Willkie Farr & Gallagher LLP. Morgan Stanley, Strait Capital Management, and Dechert LLP are advising Lexmark and its existing owners.
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